I’ve enjoyed this blog a long time but never found the right occasion to publish it. This being the first business day of 2023, I’m re- publishing it now (the original is on the website of the Australian Actuary).
Pensions in the UK are in a mess. We’ve not found a new way forward, DC is just a holding pen until we do. This piece was written in 2009 but it could have been written yesterday.
I needed to travel to London. I began my preparations with a call to an airline that I hadn’t used before but that I was keen to try, given its appealing advertising.
“Wombat Airways, good morning, this is Margaret and how can I help?”
“Good morning, Margaret, I’d like to book a ticket for a flight from Melbourne to London at the end of next month. My name is David.”
“Well, David, I can help, but before we talk about where you want to land, can I ask how much you want to pay?”
“Well, whatever it takes, I suppose. What’s your price?”
“I’m sorry, I can’t tell you that since that would be giving you advice. No, you must tell me how much you want to pay.”
“But you must give me some idea? What if I said $5000; is that enough?”
“It might be, David, but we won’t know in advance.”
“Well what are other people paying? What would you pay if you were me?”
“Look, I can’t tell you. It’s a risk and you have to make that choice; I can’t make it for you.”
At this stage, I was starting to become just a little tense, but did my best to be civil with Margaret. After all, she was probably following a script.
“OK,” I sighed, “we’ll stick with the $5000.”
“Fantastic,” she said “let’s pretend that $5000 is enough and see what happens!”
“Margaret, what happens if $5,000 is not enough?”
“If your money runs out, we will ask you to get off. There are an increasing number of passengers being ejected these days, so you probably won’t be alone. If you do fail to reach your objective, you will have to rely on a pair of roller skates and a dodgy plastic compass to get you home.
Those items are provided by the Government, but only to those people who don’t already have a pair of roller skates and a dodgy plastic compass. They call it their ‘means test’.”
“And if $5,000 is more than enough?”
I asked, looking forward to hearing a sensible answer for a change.
“In that case, we will send you a cheque for the balance, less a payment fee.”
“Will you pay interest?”
“Yes, but we don’t know how much. It could be positive or negative.”
I didn’t feel like entering into a discussion about interest and the theoretically interesting diversion about whether interest could be negative. In fact, I just wanted my tickets booked, paid for and the phone call to end. But Margaret wasn’t finished.
“Now,” she said with renewed brightness. “What type of aircraft would you like to fly in? At Wombat, we have a range of options for you to choose from, to allow you to tailor the flight to your personal situation.”
“Margaret, you tell me which one is appropriate, given where I’m going and how much I’m paying.”
“I’m so sorry David, but I’m not allowed to. That would be giving advice. But I can tell you that our different aircraft have different characteristics; some are slower and noisier but they are exceptionally reliable, in that they will get there, but we don’t know when they’ll get there! The really new versions are very exotic, fast and quiet but we’ve lost a few recently.
Their engines have this new device fitted called a cognitive double-quick orbiter (CDO) that can fail unexpectedly but the engineers don’t really know why. It seems some of the pilots weren’t even aware the CDOs were installed.
The really scary thing was that a pilot would report a problem with their CDO on the Los Angeles route and a plane sitting in the hangar at Tullamarine would suddenly collapse under its own weight.”
“Excuse me, does that mean I’m less likely to land in London?”
“Yes, that’s right. There is a full description of all the risks in our Plane Details Specification, or PDS for short. I will send you a copy of the PDS. If after reading it you still have questions, you really should consult a licensed aeronautical advisor. But be careful, make sure your advisor is licensed by ASIC, the Aeronautical Surreptitious Investigations Commission.”
At this point, Margaret clearly felt the conversation wasn’t going as well as it should. She was only young and may have been put off by my surly manner coming over the line.
“Margaret, when I used to fly with one of your competitors, I said where I wanted to go and the airline told me how much to pay. It was easy.”
“I’m sorry, David. We have moved away from a Destination Bound (DB) system to a Destination Concealed (DC) system.”
Bewildered, I thanked Margaret, paid my $5000 and crossed my fingers.
Like David, I need to get direction into my pension! But I’m not waiting another 14 years!